AMD Comments on Graphics Chips Market in Q3 2010

Shipments of graphics adapters in Q3 2010 were below expectations and below shipments in the second quarter. What is it? A sign of new weakness in the global economy? Or just a temporary correction caused by local factors? Let us try to find it out with a vice president of the leading supplier of standalone graphics processors - Advanced Micro Devices - who kindly answered questions of X-bit labs.

Shipments of graphics adapters in Q3 2010 were below expectations and below shipments in the second quarter. What is it? A sign of new weakness in the global economy? Or just a temporary correction caused by local factors? Let us try to find it out with a vice president of the leading supplier of standalone graphics processors - Advanced Micro Devices - who kindly answered questions of X-bit labs.

Traditionally, sales of graphics adapters in general and standalone graphics processing units (GPUs) in particular top in the third quarter. There are many reasons for that: loads of consumers buy new equipment during the back-to-school season, large OEMs are forming their lineups for the final months of the year, some companies begin to think about Christmas season and some people simply buy new graphics boards to play the latest video games for PC. This was not exactly so in Q3 2010, according to recently released market share and shipments numbers by Mercury Research.

Matt Skynner, corporate vice president and general manager of GPU division at AMD

It appeared that shipments of discrete graphics cards increased a bit, but sales of standalone mobile graphics processors were down significantly. To make the matters worse, sales of chipsets with integrated graphics processors (IGPs) dropped significantly. In overall, the whole market of graphics adapters dropped by 4.9%, according to Mercury Research, a leading graphics chips market tracking firm.

Some of the numbers of the Mercury Research report (which can be viewed in our news-stores: 1, 2) were so surprising that we decided to ask leading suppliers of graphics processing units - AMD and Nvidia - about them. Fortunately, we have managed to ask some questions to Matt Skynner, corporate vice president and general manager of GPU division at AMD. Unfortunately, Nvidia is in its quiet period at the moment and it cannot answer any market or financial performance-related questions even briefly.

Let us find out, what was hot for AMD's ATI unit back in the third quarter and what was not!

Mobile Down, Desktop Up

X-bit labs: Traditionally, Q3 2010 is very good for graphics cards, but this year the market was down. What were the reasons for that?

Matt Skynner: I think one of the reasons from the notebook point of view is that notebook GPUs peaked in Q2. So, it has been a bit of inventory correction that happened in the third quarter. Our notebook GPU numbers are still pretty good. If you look at them, you will find out that it is the second highest number of mobile GPUs we have ever shipped. In Q2 we shipped the most mobile GPUs we have shipped ever. So, it was a bit of correction in the third quarter from an inventory point of view that impacted most Nvidia and not us.

AMD's shipments and market share numbers for mobile GPUs are not just good, they are excellent. According to Mercury Research, AMD shipped 9.28 million of standalone GPUs for notebooks in the third quarter of 2010 (down 15% from Q2) and grabbed 61.90% of the market. By contrast, sales of mobile GPUs by Nvidia Corp. dropped by 32.7% and it only supplied 5.7 million of mobile GPUs.

X-bit labs: Shipments of your integrated chipsets dropped more significantly than shipments of standalone ATI Radeon graphics processors (this is more or less correct to both desktop and mobile families). Did you see certain customers with integrated graphics switching to discrete GPUs? Or you started to ship for certain new designs with discrete GPUs, which helped to offset dropping demand for discrete chips?

Matt Skynner: The number of design slots has not changed from Q2 to Q3. The other thing is that, particularly for desktops, Mercury Research and Jon Peddie Research report sell-in numbers. It also depends where in the [supply] chain are those GPUs. Actual graphics cards based on those chips may come later.

X-bit labs: Shipments of mobile GPUs were down, whereas desktop processors enjoyed growth. Is it deferred demand that was caused by product shortages, or there are certain interesting trends going on on the market?

Matt Skynner: Shipments of all types of desktops products went up. The channel is more seasonally affected than the OEMs. Generally, Q3 is a bigger market than Q2 for the channel. We have had very good demand for our Radeon HD 5700-series and 5800-series, we could not supply all of that. [So there is deferred demand], but I am not sure all of the growth is that. [...] Our share went touch-down in desktops. Perhaps, Nvidia gained some share with the GeForce GTX 460, but we have just launched the Radeon HD 6800-series and I think we are in a better position and I believe we are gaining share.

Indeed, Nvidia gained desktop market share as it served gamers with rather advanced GeForce GTX 460-series products. And while with the model 460 AMD's graphics unit dropped the ball in Q3 (without significant ramifications, based on Mercury Research's numbers), in the fourth quarter the company returned with the Radeon HD 6800-series, which is pretty competitive.

DirectX 11 GPUs Gaining Share

X-bit labs: How significantly were you affected by TSMC's ability to produce enough 40nm chips in Q3 2010?

Matt Skynner: We could not meet all our demand in the third quarter of this year on the Radeon HD 5800- and 5700-series. But the overall situation was getting better in Q3.

X-bit labs: Can you reveal the split between DirectX 10 and DirectX 11 capable products among your shipments in Q3?

Matt Skynner: In September we said that we had shipped 25 million DirectX 11-capable graphics processors since the launch in September '09. The share is shifting very heavily towards DX11.

Due to competitive reasons AMD's vice president does not disclose the amount of DirectX 11-class graphics processors that were shipped in the third quarter of 2010. But we can do some math, can't we? On the 1st of June, 2010, the company announced that it had shipped 11 million DirectX11 graphics processing unit. In mid-October the company claimed that it had shipped 25 million of DX11-capable GPUs by the end of September. This means that the company supplied 14 million of DirectX 11-class graphics products between June and September, both discrete and mobile. Keeping in mind that, according to Mercury Research, AMD sold 16.95 million of standalone graphics processing units in Q3 2010 in total, it looks like the vast majority of them indeed supported DirectX 11 API.

X-bit labs: What are your expectations for calendar Q4 in terms of discrete desktop and discrete mobile GPU shipments?

X-bit labs: Do you expect shortages of 40nm chips to persist in Q4 as well?

Matt Skynner: We have just launched a new product. With the launch of every new product the demand often outstrips supply as we ramp up production. I do not see it as a 40nm capacity issue, but it is an normal issue during the ramp up process. There could be issues with availability of our new products, but those may not be capacity issues.

X-bit labs: But you do have internal shipments targets for the Northern Islands series? Which you will never share? :)

Matt Skynner: We absolutely do [have such targets]. No, [we do not share them].

X-bit labs: Maybe you would like to add something on the Mercury Research's numbers?

Matt Skynner: The numbers from Mercury Research go up and down. I often look at the trends. Over the last six quarters or so we have gone from ~35% standalone GPU market share to over 50% share. The trend is good for AMD, we are happy about that and we intend to keep that trend going.

Some Thoughts

It is obvious that ATI, graphics business unit of Advanced Micro Devices, is not only back, but it is back in big time. In terms of market share, the company continues to fight fiercely against its rivals and with its new product lineup - ATI Radeon HD 6800 and ATI Radeon HD 6900 - almost already here, it has very high chances to win the high-end of the market once again.

Nvidia is not standing still and its performance in Q3 2010 is quite remarkable when it comes to graphics processing units for desktops: the company boosted its standalone GPU shipments by 28.7% and managed to increase supplies of IGPs by whopping 41%. So far the company has been acting predictably for analysts and AMD in terms of behaviour, even though very few could make assumptions about actual performance of GF100 or GF104. At this point not a lot outsiders have credible ideas about performance of the GeForce GTX 580 also known as the code-named GF110. But since we do know about the product ahead of launch, Nvidia is on the right path to further capture mind share.

But while ATI unit of AMD is definitely getting more products to win the market share: Radeon HD 6800 "Barts" and Radeon HD 6900 "Cayman", it should very carefully watch even tiny shift on the market to address it quickly. The company managed to boost its sales on discrete desktop market amid heavy competition in the third quarter and that shows that ATI is again rapid and flexible.